Dental Practice Loans: Where to Get Dental Practice Financing

Dental practice loans are used for working capital or to purchase a commercial facility. SBA loans for dentists have the best rates and longest terms, but the time to funding can be 30-90 days. Alternative loans have an APR range between 30%-50% but are quick to fund and could cost less if paid back quickly.

OnDeck is our recommended alternative loan provider for dental practices. They offer rates for prime borrowers starting at 6.99% and can fund in as little as one business day. Their online application takes just a few minutes and you can pre-qualify for up to $500K.

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Types of Business Loans for Dentists

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Alternative Dental Practice Loans

Alternative dental practice loans are high-interest, short term loans that you typically pay back within one year. These loans are often used for marketing, the purchase of new equipment, lab supplies, or other working capital dental practice needs. They can be an excellent cash flow solution if you’re just getting off the ground or if you need cash while waiting for insurance payments to clear.

Alternative Dental Practice Loan Rates & Terms

Alternative dental practice loans carry interest rates between 30 – 50% and have repayment terms between 3 months to 3 years with amortized monthly payments. You can borrow between $5K and $500K, depending on your dental practice financing needs and factors like your annual business revenue, profitability, and how long you’ve been in business.

Alternative Dental Practice Loan Qualifications

Alternative lenders often qualify you automatically after going through their online application process. This speeds up the time it takes to get funding, but also means you must meet their minimum loan requirements in order to get funded. You’ll typically qualify for an alternative loan if you meet these minimum standards:

• Credit Score: 600+
• Time in Business: 1+ Year
• Annual Business Revenue: $100K+

Alternative Dental Practice Loan Application Process

The application process with an alternative lender like OnDeck is far less document-intensive than with a traditional bank or SBA loan provider and takes just a fraction of the time and energy. Applying for an OnDeck loan only requires basic personal and business information and can be completed online in just a few minutes.

The streamlined application process with alternative loans is even more of a time saver for higher net worth dental practice owners. If you have stakes in multiple businesses, practices, or own rental properties, an SBA loan will require complete financial documentation for all of those entities. Applying with an alternative lender will not.

The entire alternative loan funding process takes 1-3 business days, which gives your practice a much faster solution than you would get from a lengthy SBA loan application process. For this reason, alternative loans are flexible and can help you solve unexpected problems like replacing a periapical x-ray so your operatory room isn’t down.

Where to Find Alternative Dental Practice Loans

Most online lenders will typically offer alternative loans to dental practice owners. Our recommended alternative loan provider is OnDeck, who can fund you up to $500K in as quick as 1 business day. Their online application can take less than 10 minutes.

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SBA Dental Practice Loans

SBA dental practice loans are the most affordable loan you’re likely going to get. This is because while you borrow the money from a traditional loan provider, the loan is guaranteed by the Small Business Administration (SBA). These loans are therefore less risky for your lender and will have lower rates than an alternative loan.

SBA loans also have longer repayment terms than alternative loans, making them an excellent financing product if you want to buy large equipment or commercial real estate. However, they aren’t typically a good fit for everyday working capital need or unexpected expenses, because it can often take 30 – 90+ days to get funded.

SBA Dental Practice Loan Rates & Terms

SBA loan rates vary based on the government prime rate, but the maximum rate typically falls between 6 – 9.5%. There is also an SBA guarantee fee on your loan that can be as much as 3.5%, and your lender may have other fees. Repayment terms are up to 10 years with monthly amortized payments.

SBA Dental Practice Loan Qualifications

Since the loan is guaranteed by the SBA, there are certain minimum qualification requirements you must meet for approval. Your lender may also have requirements based on their own standards, in addition to the SBA’s. The minimum qualification requirements for an SBA loan typically are:

• Credit Score: 680+
• Down Payment: 10%+
• Collateral: Some collateral is typically required
• Annual Gross Revenue: $120K+
• Time in Business: 2+ Years
• Other Requirements: Business must be profitable and you can’t have any delinquencies, defaults, bankruptcies, or tax liens on your personal credit profile.

As a dentist, you’re typically already a great borrower for most lenders due to your high income potential. When you go to your local bank, lenders typically recognize your income potential and weigh it as heavily as other normal qualification requirements.

SBA Dental Practice Loan Application Process

The SBA loan application process requires more planning than an alternative loan. Closing an SBA loan can often take 2-3 months, and it can be pretty invasive. Your lender will likely keep you very busy gathering documents while you wait to be funded. After your initial application submission, they will typically need the following documents for each business you own:

• Ownership Information
• Business Licenses
• YTD Balance Sheet
• YTD P&L Statements
• Business History & Overview
• All Business Leases
• Projected Financials (1-3 years)
• Business Tax Returns (Last 2 years)
• Personal Tax Returns for all 20%+ Owners (Last 2 years)
• Resumes for all 20%+ Owners

Additionally, if you are using the loan to purchase another dental practice, you’ll need to provide the following information about the practice being purchased:

• Current Balance Sheet
• YTD P&L Statement
• Business Tax Returns (Last 2 years)
• Proposed Purchase Agreement
• Schedule of Inventory, Equipment, Fixtures, and Other Assets

Once you submit your documents, you’ll go through two approval processes. First, you need SBA approval in order for them to guarantee the loan. Then your lender has to approve you through their own underwriting process. This combined process can take up to 90 days, depending on the bank and your business structure.

The entire process can require multiple trips to your bank and many phone calls with your loan officer. This could take you away from your practice and stop you from focusing on growing your business.

Where to Find SBA Dental Practice Loans

SBA loans can be found through traditional banks and other lenders. You might be able to get an SBA loan at the bank you currently have a relationship with, or at any national or regional lender you know. The best thing to do is to ask the bank directly what SBA loans they offer.

Which Loan is Right For Your Dental Practice

With an SBA loan, you can expect to get the lowest rates, but a short term loan with a lender like OnDeck might actually carry a smaller total cost of capital. This is because you repay an OnDeck loan within 3 years while you may be paying interest on an SBA loan for up to 10 years. How fast you plan on repaying the loan is one of the biggest indicators when making the choice between the two loan options.

“The most important loan attribute for a dentist is the ability to pay back the loan,” said Dr. Emily Letran. “When you buy a new dental practice you should complete a cash flow analysis to determine if you will have enough cash flow to support the new loan, and how fast you can repay it. Dentists have their pick of loans because of their ability to earn a great income, but they need to know how the loan terms and total cost of capital will impact their practice.”

The loan you choose will also depend on what you plan on using the funds for. If you’re looking to finance commercial real estate or large pieces of equipment, then an SBA loan is going to be your best bet. However, if you just need quick working capital and don’t want to deal with the headaches of a traditional loan process, then alternative financing is the way to go.

An established dentist office can likely qualify for either loan. But if your practice is new or your credit score is being weighed down because of high student loan balances, then an alternative loan from OnDeck loan is more likely to meet your needs. They can fund you for up to $500K in as quick as 1 day if you have a 600+ credit score.

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Most Common Uses for a Dental Practice Loan

Many small businesses will need access to financing from time to time. Since dental practices typically have strong cash flow and profitability, their financing needs usually center around major purchases like commercial real estate or equipment. However, dental practice owners will also need financing for short-term working capital needs.

The 4 main reasons dentists look for a loan for their dental practice include:

1. Dental Practice Financing For Acquisition

Dentists often purchase (or consider purchasing) a practice from another dentist. Occasionally this will be for a first practice, but more often for a second or third practice as a way to grow an existing business.

Practice acquisitions can be carefully planned out with plenty of time for both parties. This usually happens when the seller is retiring or moving to a new area. In the case of the seller, this means getting all the appropriate financials prepared for the buyer and possibly addressing any underlying concerns that may exist. For the buyer, this may mean lining up financing like an SBA loan to facilitate the purchase.

However, dental practice acquisitions can sometimes be hastily arranged. The seller might actually be an estate that is settling the affairs of someone recently deceased. The sale might be triggered by a divorce or other some other financial hardship. There are plenty of scenarios like these where the sale takes place in a shorter time frame.

In these cases with hastier sales, the buyer may not have time to line up long term financing. They may find that an alternative loan will help them complete the acquisition in the seller’s time frame. The loan can always be refinanced at a later date if you want a longer repayment term.

2. Remodeling Your Dental Practice

Like any small business owner, dentists may find themselves needing to renovate or remodel their offices. Knocking down walls to create a more spacious layout, moving wiring and bring plumbing up to code, installing AC and ventilation systems, repaving the parking lots and building awnings, or just updating the decor can all take a significant amount of capital.

In addition to these improvements, dentist offices usually have many perks for their patients. For example, your patients expect your office to have televisions in every operatory to put them at ease and help pass the time, and they want a waiting room that does the same. These aren’t cheap upgrades and often require financing.

Some of these projects will be well planned out and you’ll have time to save for the expense or obtain long term financing. Other projects may pop up as a surprise and require capital more quickly. What’s more, even if your remodel or renovation is planned out, long term financing can require so much paperwork that it won’t seem worth it.

For example, SBA loans will often require lender approval of the contractors you work with, which includes verifying their payment schedules and contractors insurance. It can be a lot to coordinate and create a bunch of paperwork that your contractor might find cumbersome. If you know you’ll have the cash flow to pay off the loan within a year, then an alternative loan might be the easier and more efficient choice.

3. Expanding or Relocating Your Dental Practice

There are two main expenses involved with expanding or relocating, the cost of the new facility itself and the cost to remodel. Whether you need to relocate your dental practice because your lease is expiring or you need to open a new location or satellite office, a business loan can help you manage the costs of the transition.

You’ll need to fund the operations of a new facility before you bring in any revenue, such as hiring a new staff. While revenues from the new office will eventually be able to sustain these expenses, financing is usually required to get the new office up and running.

According to the husband and wife team of Dr. Dustin Cohen and Dr. Stacey Cohen of The Practice of Beverly Hills, expanding your practice brings a whole new list of expenses. In addition to remodeling your new office, which costs between $80 – $100 per square foot, you’ll need to prepare for these additional expenses:

• Rent of New Location
• Utilities
• New Staff Salaries
• New Equipment for Each New Operatory
• New Lab Equipment
• Dental Supplies
• Office Supplies
• Advertising
• Computer and IT Equipment & Support
• Expand Your Current Insurance
• New Payroll and Income Taxes
• Business License

4. Marketing & Advertising to Grow Your Dental Practice

Marketing and advertising are critical when you open a new office, expand your patient rolls, or offer new procedures or treatments. While marketing might be mission-critical, it’s usually not cheap. Here are just a few of the marketing and advertising strategies that a dental practice may be considering:

• New Website
• Local SEO Efforts
• Paid Advertising on Google
• Paid Advertising on Facebook
• TV Commercials
• Billboards

Every dollar you put into marketing your dental practice should pay dividends. Short term borrowing to launch a new marketing initiative can pay for itself quickly through an expanded patient roster or by driving existing patients to higher margin cosmetic or elective procedures.

Dental Practice Loans for Bad Credit Borrowers

Growing school costs often cause dentists to obtain private loans to either pay for tuition or at least pay for living expenses while in school. These private loans can handicap your borrowing ability. For example, they can come due before you’ve got your practice off the ground, and they often hurt the credit of many dentists who can’t yet afford the payments.

Other dentists may have bad credit from unexpected events in their life or from poor financial decisions. Regardless of the reason, it can be difficult to borrow for a dental practice when you have bad credit. While you’re likely to be a high income earner, you also have a history of poor financial management. This is risky for any lender.

Traditional lenders, in particular, will struggle to lend if you have bad credit. In fact, you can’t qualify for an SBA loan if your credit score is less than 680. Your only option might be an alternative loan from a lender like OnDeck, where you only need a 500+ credit score. If your credit is even worse than that then you’ll likely need to repair your credit before getting financing.

Benefits of an OnDeck Small Business Loan for Dentists

An OnDeck loan can benefit your dental practice by giving you fast funds to fulfill any of the needs discussed throughout this article. You can fill out an application within 10 minutes and get up to $500k in as little as a day. Working with OnDeck has 4 main benefits:

1. OnDeck is Faster Than a Bank Loan: An SBA loan can take up to 90 days or more to fund. OnDeck can fund as quick as 1-3 days.
2. OnDeck is Easier Than a Bank Loan: OnDeck’s online application takes just a few minutes and syncs with your accounting software and bank account, which keeps paperwork at a minimum.
3. OnDeck Offers Competitive Rates For Prime Borrowers: If you qualify as a prime borrower your rate could be as low as 6.99%.
4. OnDeck Also Offers a Small Business Line of Credit: Perfect for those practices who want credit available if the need arises, but don’t want to pay interest on a term loan just to hold money in the bank.

OnDeck Dental Practice Line of Credit

Lenders Want to Work with Dentists

Small business lenders view dental practices as safe businesses with steady revenue streams and healthy margins. More broadly, they view the dental industry as a safe sector that leads to relatively high, stable incomes and high net worth individuals.

Lenders have good reasons to feel confident when lending to dental practices. As the chart below shows, the SBA finds that dentists have some of the lowest failure and charge off rates in any industry. Even within the successful medical industry, dentist offices stand out as top performers.

With industry charge off rates under 1%, dentists who own their own practice are able to be more selective about the small business lenders they work with and the financing they take out. Many small business owners decide they want to be very selective about the rates and costs of their loans, but others are likely to prioritize speed and simplicity. As a dental practice owner, you can shop around and be as selective as you like.

Bottom Line

Dentists that own their own practice will typically qualify for most types of small business financing. An SBA loan is likely going to result in the lowest monthly payment, but SBA loans have arduous application processes and can take months to get funded. Alternative loans will carry a higher APR, but the total cost of capital could end up being less.

Prime borrowers can qualify for up to $500K with OnDeck at rates as low as 6.99%. OnDeck’s online applications can be completed in just a few minutes and your practice could be funded in as little as 1 day.

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